Alan Walsh is the vice president of banking for Wincor Nixdorf USA and a frequently interviewed expert on Check 21 and deposit automation. To submit a comment about this article, please contact the editor.
While the task of outfitting a bank with the technology necessary to meet Check 21's requirements may seem daunting, many banks haven't yet considered the positive financial impact these upgrades can have on their bank's business. Meanwhile, other financial institutions that have implemented branch image-capture technologies are already reaping numerous benefits.
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As check imaging takes off in the United States, the question on most retail bankers' minds isn't "if," but "when" to implement branch image capture.
Below is a list of "Check 21's Top Ten" - a list of compelling reasons for FIs to invest sooner rather than later in technologies that help banks meet the near-term goals of Check 21 and enhance their competitiveness in the long run.
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| Alan Walsh |
Paper checks are being transitioned to electronic images of checks at an unprecedented pace. According to the Federal Reserve, only two years after the effective date of Check 21 in October 2004, check payments totaling almost $8 trillion per year have already moved from the traditional paper-based clearing process to improved image-based processes. Based on the 2004 Federal Reserve Payments Study, that amount is much greater than the sum of all debit-card payments ($.6 trillion) and all credit-card payments ($1.7 trillion).
The number of images received by paying banks exceeded the number of substitutes for the first time in September 2006. The rate of growth in images is accelerating. And the number of institutions participating in image-based clearing totals almost 5,500 (approximately 34 percent of all institutions).
More are expected to implement check-image enhancements in the near future.
The Top Ten
- 10 - Protect banking continuity in case of disaster Electronic check imaging helps FIs remain operational in the event of a national catastrophe that makes transportation of bank documents impossible. Check 21 makes it possible for FIs to continue depositing and clearing checks, even if the physical transportation network is compromised.
- 9 - Reduce expenses Check 21 technology eliminates the expenses associated with transporting paper checks to processing sites and clearing houses. Additionally, electronic check imaging can help reduce float expenses, since collection delays caused by transportation or weather-related problems are no longer issues. Industry experts state that traditional ATM deposits with envelopes cost $1.70 per transaction; ATMs that image checks deposits reduce that cost to 40 cents per transaction.
- 8 - Reduce overhead Without paper checks to process, banks can eliminate many overhead or infrastructure expenses, such as processing costs and human resource and equipment expenses.
- 7 - Diminish fraud Reduce exposure to fraud with faster clearing and advanced check validation. Envelope-free ATM deposits also eliminate "empty envelope" deposits.
- 6 - Improve customer acquisition and retention Implementing Check 21 technology allows banks to differentiate and compete by offering remote-data-capture capabilities and/or enhanced image-based products and services customers want.
- 5 - Expand customer service The added ability to extend deposit deadlines helps banks provide better service and improved fund availability for customers. Enhanced transaction automation also frees branch staff to focus more of their efforts on servicing customers' needs.
- 4 - Enhance error resolution Because of electronic check imaging, banks are able to forward and restore images at other locations to address processing problems with individual deposits or even in full-scale contingency situations.
- 3 - Improve clearing times Since physical transportation to a processing location is eliminated, electronic checks enter the clearing process faster.
- 2 - Increase customer catisfaction and ATM use Customers want to control the interactions they have with their banks. Electronic check processing gives them more of what they want and increases customer transactions per ATM, changing the transaction mix to enhance the profitability of a bank's ATM channel.
- 1 - Transform the revenue model Migrating more customers to the ATM channel for appropriate transactions frees up branch employees, who can now spend more time selling services inside the branch.
| Check 21 is a strong catalyst for change in the banking industry. Checks remain the largest non-cash payment option in the United States, and American consumers continue to see checks as a critical payment mechanism. To compete in today's rapidly changing banking industry, financial institutions, whether they are national, regional or local, must focus on three goals: acquiring new customers, retaining current customers and controlling costs. Banks that proactively invest in technologies that provide the means to meet those goals are the ones that will remain competitive tomorrow. |
